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Hi Therapist,

Yes, be ready because if the tide were to turn he might revert back to his previous member name, NeilHannon...

Speaking of tide, Tide Spirit, ATA: at Armada Kraken, 2022-04-04 09:59 . So, should depart AK by noon today, which is great news Krakie.

Hi Londoner7, I look forward to read the est of the forensic investigation. Your summary of the blurbs that ENQ IR wrote about Magnus since the acquisition is very comprehensive. Much appreciated. At some point I tried to do the same for its impact on the BS and accounts in general, and reserves. My take since the GE acquisition has been "fix Magnus and the SP will fly," as long as AB does not embark on some challenging project.

ATB

Hi Londoner7,
Your broad reply was informative. Thank you.
I see a new HYB, and the RBL being used for a new acquisition and/or to increase CAPEX over the next 2 years (Malaysia, GKA (as otherwise it will go into CoP - you will have seen https://www.oedigital.com/news/495288-hungary-s-mol-sells-uk-north-sea-assets-to-waldorf ), and the refitting of EP for a 3rd party as part of a farm-in).

The problem child was a very well behaved toddler early on. Indeed, if you read my 2018 early 2019 posts, i might have written that the $1B contingent consideration to BP would not just be paid, but would be paid around 2025/2026. your optimist is for sure based on something tangible. could you please elaborate further?
I do not know what the real issues are... ENQ keep everything a secret. ENQ stated it was fixed but the OGA January data says, 9Kbopd (yes, that is 9!), and 11.3Kboepd. Sure, there was increased water injection, but we know that February would not have been much better. so, yet another puzzler for you:
how is it possible that production in DEC 2020 was 19.3Kboepd, and 13/14 months later has declined by a staggering 40%?
as far as i can see the 2P reserves have not been revised down. and yet, the contingent consideration continues to go down "The contingent consideration was fair valued at 31 December 2021, which resulted in a decrease in fair value of $145.3 million (2020: decrease of $137.4 million). The decrease in fair value in 2021 is a result of revised operating cost assumptions. The decrease in 2020 reflected the change in oil price assumptions." it seems as if the 2021 revision is driven by higher OPEX... but in my view, that is not the issue. instead it is lower production volumes. thus 2p reserves ought to be wriitrn down...

Hi Tigar,
i am glad it now all makes sense. hopefully the RBL facility's balance will be less than $250M by end of April.

ATB

Hi Tigar,
I was surprised by ENQ's decision to refinance the RB before the HY bond. My recollection (and I no longer follow ENQ so closely) was that ENQ was going to issue a bond for $500/$600M and draw down about$500M from the RBL facility going forward. I thought JS/Ab might have stated this last year. Obviously, their current plan is now different from that. It remains to be seen if issuing a RB w/ a 9% interest rate opens the way to the issuance of a Low (i.e., <=7%) Yield Bond.... We shall see.
With inflation high at the moment fixed nominal int rates have to be high so that real int rates are attractive to the lenders.

2P reserves: 17.5 2P reserves of GE is a good figure. And there are also c.3 MMbbls of net 2C resources, after the wells that were drilled.
GE's figures: Enq paid c. $250M at the end of October. It will pay another $50M in July 23. So that is a $300M price tag.
Given production of 620Kboe (=1701boepd x 365), and given average price for Brent of $78/bbl, giving a margin of $68/bbl, $42M of CF. So $258M of CF have to be recovered for breakeven excluding decommissioning expenses. As ENQ added a decomissioning provision of $119.3M for GE, the CF from production net of OPEX and CAPEX that needs to be recovered is $377M. Given $17.5 MMbbls 2P reserves ( but 1 MMbbls is used as fuel by GE), the net margin per bbl required is $22.85/bbl...

londoner7
A few comments on your calculations. You wrote "End of Feb RBL was $330m, after two months debt reduction of $132m." Yes, debt reduction of $132M "$132.0 million from 31 December 2021, reflecting strong free cash flow and positive working capital movements. As at the date of this announcement, the Group had made further early
voluntary repayments of its RBL facility totalling $85.3 million, with the amount drawn down reduced to $329.7 million."
Thus, if you control for positive working capital movements, FCF might have been not too much different from the $85M repaid (which is below the $100M reduction in the amount that can be drawn from the RBL facility). We might ask then why only $85M? A possible answer might be that hedging in 2022 was front loaded, with a lot more hedging in Q1 than in the other quarters. That being the case FCF in future months will be higher. Thus,...

I leave you with a puzzler: What is Magnus's OPEX?
See note 22 in the ARA. Magnus's current contingent consideration for 2022 is $22.2M (at $75/bbl as per the assumptions). Thus, let us first assume production of c. 13Kboped. After OPEX aned CAPEX, FCF will be ($22.2)/3 x 8 = $60M. That is how much the pile of old steel will generate in FCF in 2022. Since we know CAPEX, it is easy to get a figure for OPEX...And it is mind boggling, unless you assume that production was assumed to be c. 10Kboped...

ATB

Savemore and PYUECK,

The answer is on who owns a lot of the bonds... This is a very sweet deal. And the shareholders have been Tullowed... minus 1 p.p....

so "Notification Of The Rate Of Interest Payable On Enquest Plc’s £155,000,000 5.50 Per Cent Notes Due 15 February 2022"... debt is now dearer. JS is in a rush to leave. Can he make it to the May TU? Defintely not to the HY results.

ATB

Krakenoil,
You must be confused.
I do not use that language towards other posters. So, it must have been someone else.
I am invested in Enq, but much less than before. Moved the money to other oil companies. Check HBR's SP change in the last month. Not different from Enq's.

You are entitled to think I am wrong about Magnus. But the OGA data cannot hide the truth, ditto for the accounts, i.e., the Annual Report.
ATB,

Digby04, I have not listened to the presentation, but what is the " the explanation concerning the seemingly erratic payments by KRG that will have provided reassurance for many potential investors."
I cannot think of anything... other than that KRG are not very reliable. Yes, we know that in 2021 they made 10 instead of 12 payments because they move from +30 days to +90days, but they have already missed a payment in 2022... What is the reason?
There was no payment in February... Unless there are two in April or May ir June, they will miss a payment in H1.
Thank you.
ATB

A few comments:
In my view JS is not staying until the HY results... Thus, bonds will be renegotiated before September. We know that " $827.2 million principal outstanding on the high yield bond, including interest capitalised as PIK of $177.2 million".
Suppose the new bond is for $600M.
Given that the RBL facility has an upper limit of $600M, and ENQ owed $329.7M at the end of February, $227.2M of the could be borrowed to repay the HY bond along with a new $600M bond. But that would mean that ENQ could only draw down another c. $43M if it needed to borrow more. Since "stuff happens better" to have a lot more moneu that could be borrowed if needed. Therefore ENQ will make further repayments of the RBL before issuing new bonds. My expectation is that when the amount drawn down from the RBL facility is down to c. $200M, the new bond will be issued.

londoner7 (I see you asked a question a long time ago... which I did not answer... is it still relevant for you? if so, i can have a look at it... I am available on my l3traderuk email .)

Given your comments on the webcast, I won't spend time litening to it...

The ARA for 2021 is out. It says everything we need to know about the pile of steel that Magnus is.
"$(145,273) (c. $145M) is the downward revision to the contigent consideration" Ouch! the discounted value on the BS of the contingent consideration is now $344,627,000." how did they do it? "The decrease in fair value in 2021 is a result of revised operating cost assumptions." This avoids a downward revision of the 2P reserves. But, If Magnus stays at c. 12Kboepd as in Jan and Feb (I believe Tarmak's projections are spot on), at some point there will be other items being revised...

Clearly, production in Jan&Feb, average production in 2022 will be below 50Kboepd given the shutdowns ahead.
FCF in 2022? $500M would be a big success.

Is ENQ at 30p still undervalued? I surely hope so. Can it get to 60p? Ask Putin...

Very sorry to see hitman1a selling down. A poster with very realistic and balanced views.

ATB

I am very sorry to say but this is not the best move by Tullow. All you have to do to understand why this is so is to read ENQ's annual and HY reports. The level of information disclosed by ENQ was much less than we are used to see Tullow releasing. ENQ never provides FCF guidance or detailed info on hedges. Also ENQ's hedging strategy over the years was not very effective. I must say I am not impressed by the CEO's choice of CFO. But time will tell...

Hello Slift,
Still waiting to hear your views on the results...

Hello jj.. & seekingalpha,
Thank you for sharing your views and calculations. I am a newby posting on this bb... but LTH of Tullow. Mr Market has it wrong, because it is focusing on this year's FCF which will be less than anounced given the completion of the extra equity in Ten & Jubilee, but sets up a huge increase in FCF next year. The pre-emption purchase makes a lot of sense and will add unhedged bbls. By the end of 2022, most of the $175M purchase price of the increased stakes will have been made through FCF from the production. In my view, TEN is what is holding back Tullow's SP rise.
ATB

I am voting against the board as well, and hope most LTHs do the same. Time should be up for them.

Jim800
Looking at payment figures alone could be misleading because it does not take into account oil prices, which were November 30, 2021, 79.92 ; October 31, 2021, 82.06. So, 2.5% higher in October. But you are correct as revenue decreased by 5% from October to November.

I have a different reading of the timing of the payments by KRG.
On 5 November payment received for August, so 66 days after 31 August.
On 14 December payment received for September, so 75 days after 30 September.
On 31 January payment received for October, so 92 days after 31 October.
On 11 March payment received for November, so 101 days after 30 November.

Do you see a trend? It is very obvious that KRG are delaying payments. They will start paying 4 months after production pretty soon.
I was hoping that GENL would recover all but $30M of the money in arrears by year end, but it is obvious that won't happen.

GENL really has to diversify, and stop investing in KRG. KRG is a very unreliable partner and jurisdiction. Doing more business with them should be avoided at all costs.
At the AGM I will vote in any way I can for the board to be relieved of their duties if until then they do not diversify their geographic presence. STOP investing in IRAQ's Kurdistan until it is run by people who abide by their contracts.

ATB

Fred, my suggestion is to use those shares to vote against the board. They have failed LT holders very badly. Buying the assets in Egypt was never a good idea (PSCs that do not give CNE high marghins of profit; why do I care that production is c. 37Kboepd, if I am only getting a fraction of the net margin? Rather produce 20Kboepd and get the full margin).
Selling Kraken and Ctacher was a bad idea. Ditto for other interests in the North Sea they sold. Also, selling Senegal was a very bad idea.
All this buying and selling has only benefitted the Banks and the Lawyers that have cost a lot of money over the last 18 months.
The board really needs to either deliver or to be voted out.
ATB

As usual KRG is late with its payment. GKP was only paid last week for November. GENL has not. Not good. If KRG paid on time the cash balance would baloon. We have to bear in mind that even with POO averaging $95/bbl in 2022 we would see free cash flow of up to $300 million in 2022. That is almost c. 50% of market cap...
In fact, I would expect it to be a lot higher. Imagine the payment to be collected in June and July for Feb and March at current oil prices.
The Tawke override for these months will easily be above $15M/ month, and the Receivable recovery will easily be $10M/month. At this pace, the Genel owed $117 million (from the the KRG for oil sales from November 2019 to February 2020 and the suspended override from March to December 2020) would reduce to less than $30M by year end.

And with the Russian companies out of the picture KRG will have to play ball again with Western-based companies or deal with Chinese companies, that will squeeze them.

DYOR

lawrence and redinjun, why is this one falling more than the other Russian shares?

easyp, It is telling that the SP is stuck at the current level. Like you, Mr Market thinks the Egypt expedition is a mistake and so has little or no value. I am inclined to agree until I see evidence that goes againt it, i.e., high levels of FCF coming from there.

just a downward movement with the market or something else? any thoughts anyone with inside industry knowledge?

Hi Modestus,
Many thanks for this.
I will post on ths BB to ask your views on this and Canadian and other oil companies. I am not following ENQ's bb that closely any more. In fact, unless there is a RNS I won't post there until the results are announced on March 24. The TU allowed me to update my views on ENQ as an investment for now.
ATB
L3

SP is dropping to levels last seen one year ago. I must be missing something here that relates to the construction sector... Anyone has heard anything? We all know that energy costs are going through the roof. But there was hedging in place for 2022, if I remember correctly...

Hi January,
A few comments....
- Production given to Petronas, i.e., c. 1/3 of ENQ's Malaysia's production does not go into the revenue figure;
- BP gets 37.5% of FCF from Magnus;
- Armada Kraken FPSO is $115M per year (not in ENQ's OPEX projection, but it needs to be added to it)
- Malaysia Taxes (see previous years)
- ENQ will have to pay c.15M(???) some party as a result of litigation it lost.

Hi Therapist,
Rose' wine so early in the day? AB said he is not ruling out any deals (quoted in The times today). you know what meaning my NPL tool assigns to those words...

Hi Londoner7,
Easy to talk figures over email, still as L3.... the email is l3traderuk @ the Google joint...

Hi Tigar,
I broadly agree with you, but ENQ made many bad decisions that have impacted its fortune. For example, the lack of hedging in 2020 also pushed them to defer maintenance, and the result is Magnus not performing, if we are to believe that it is all top-side issues. GEAD was a bet on the oil price. It will cost $375M (with the $50M add on). Hopefully generates enough FCF to break even by the end of H1 2023.

ATB

Hi all,
The good news is that with current oil prices the cash owed by KRG should go down very quickly, well by $7M a month, except for the possibility that they misbehave again. But, I am now thinking they will not during H1.
so "Following the receipt of the receivable recovery payment, Genel is now owed $117 million from the KRG for oil sales from November 2019 to February 2020 and the suspended override from March to December 2020."
Following the receipt of the receivable recovery payment, Genel is now owed $124 million from the KRG for oil sales from November 2019 to February 2020 and the suspended override from March to December 2020.